Summary
A financial creditor’s March 2018 insolvency application, pleading default on 8 July 2011, was barred by limitation. Article 137 governed the Section 7 application; neither commencement of the Insolvency and Bankruptcy Code nor mortgage-related limitation supplied a fresh starting point. Even assuming Section 18 acknowledgment principles applied, the application laid no factual foundation for their invocation. The admission orders and consequential insolvency proceedings were annulled, without prejudicing other proceedings on their merits.
Issues
- What limitation period and starting point governed the financial creditor’s Section 7 application.
- Whether acknowledgment arguments could save limitation without a foundation in the application.
Provisions considered
- Sections 7 and 238A, Insolvency and Bankruptcy Code, 2016Required examination of limitation for initiation of corporate insolvency resolution; the Code did not revive time-barred claims. (¶¶ 17.4, 17.5, 30, 38)
- Section 18, Limitation Act, 1963Acknowledgment arguments failed for want of pleaded facts, even assuming the provision applied to the insolvency application. (¶¶ 17.6, 32, 33, 33.1)
Held
- The Code protects revival of the corporate debtor and is not merely a recovery remedy. The Section 7 application is governed by the three-year period in Article 137, ordinarily running from actual default, subject to condonation where made out. Neither the Code’s commencement nor limitation governing mortgage suits supplies the governing period or starting date. (¶¶ 19, 19.1, 19.2, 30, 36, 37, 37.3, 37.4)
- The respondents’ reliance on the illustrative acknowledgment discussion in Jignesh Shah did not displace the limitation principles stated in B.K. Educational Services. Independently, even assuming acknowledgment principles applied, the application stated only the 8 July 2011 default and pleaded no acknowledgment or other foundation for extending limitation. Relevant facts and evidence supporting enlargement of limitation had to be supplied. (¶¶ 32, 32.1, 32.2, 33, 33.1)
- The March 2018 application was time-barred. Its admission and all ensuing insolvency proceedings, including the interim resolution professional’s appointment, were annulled. The resulting lifting of the moratorium permitted stalled proceedings to resume strictly according to law; this decision did not determine their merits. (¶¶ 34, 38, 39, 40)
Result
Appeal allowed to the indicated extent; NCLAT and NCLT orders set aside and Section 7 application rejected as time-barred. Consequential insolvency proceedings annulled. Other proceedings preserved on their own merits. No costs.